Item 1.01
Entry into a Material Definitive Agreement.
On December 8, 2020, cbdMD, Inc. (“cbdMD” or the
“Company”) entered into an underwriting agreement (the
“Underwriting Agreement”) with ThinkEquity, a
division of Fordham Financial Management, Inc. as representative of
the underwriters (the
“Representative”), pursuant to which the Company agreed
to sell to the underwriters in a firm commitment underwritten
public offering (the “Offering”) an aggregate of
2,000,000 shares of its 8.0% Series A Cumulative Convertible
Preferred Stock, par value $0.001 per share (the “Series A
Convertible Preferred Stock”), at an Offering price of $7.50
per share. The Company granted the underwriters a 45-day option to
purchase up to an additional 300,000 shares of Series A Convertible
Preferred Stock to cover over-allotments, if
any.
The net proceeds to the Company from the Offering are expected to
be approximately $13.7 million (before the over-allotment option),
after deducting underwriting discounts and commissions and
estimated expenses payable by the Company. The transactions
contemplated by the Underwriting Agreement are expected to close on
December 11, 2020.
The Offering was registered pursuant to the Company’s
effective shelf registration statement on Form S-3 (File No.
333-228773) (the “Registration Statement”) and the
related base prospectus included in the Registration Statement, as
supplemented by the prospectus supplement dated December 2, 2020
(the “Preliminary Prospectus Supplement”) and the final
prospectus supplement dated December 8, 2020 (the “Final
Prospectus Supplement” and collectively with the Preliminary
Prospectus Supplement, the “Prospectus Supplement”)).
The legal opinion and consent of Pearlman Law Group LLP addressing
the validity of the securities sold in the Offering is filed as
Exhibit 5.1 hereto and is incorporated into the Registration
Statement, and the legal opinion and consent of Gavigan Law, PLLC
related to certain matters under North Carolina law is filed as
Exhibit 5.2 hereto and is incorporated by reference into the
Registration Statement.
The Underwriting Agreement contains customary representations,
warranties and agreements by the Company, customary conditions to
closing, indemnification obligations of the Company and the
underwriters, including for liabilities under the Securities Act of
1933, as amended, other obligations of the parties and termination
provisions.
The underwriters will receive discounts and commissions of 7.25% of
the gross cash proceeds received by the Company from the sale of
the shares of Series A Convertible Preferred Stock in the Offering.
The Company will issue the Representative a warrant to purchase
150,502 shares of the Company’s common stock (equal to 3%
of the quotient of the gross proceeds from the Offering
divided by $2.99 which was the last closing price per share of the
Company’s common stock on the NYSE American prior to the
execution of the Underwriting Agreement for the Offering),
exercisable at $3.74 per
share. The Company has agreed to reimburse the
Representative for all reasonable and actual out-of-pocket
accountable fees and costs incurred by the Representative in
connection with this Offering up to a maximum of $105,000 in the
aggregate, including the fees and expenses of the
underwriters’ legal counsel. The Company estimates the total
expenses of this Offering, which will be payable by it, excluding
the underwriters’ discounts and commissions, will be
approximately $215,000. The Company intends to use the net
proceeds of the Offering for general working capital.
The Company and certain of its executive officers have entered into
Lock-Up Agreements with the Representative pursuant to which they
have agreed not to sell, transfer, assign or otherwise dispose of
the shares of the Company’s securities beneficially owned by
them, subject to certain exclusions as set forth therein, for a
period ending 60 days from the closing date of the
Offering.
A copy of the Underwriting Agreement is filed as Exhibit 1.1 to
this Current Report on Form 8-K and is incorporated into this Item
1.01 by reference. The Underwriting Agreement has been included to
provide investors and security holders with information regarding
its terms. It is not intended to provide any other factual
information about the Company. The representations, warranties and
covenants contained in the Underwriting Agreement were made only
for purposes of such agreement and as of specific dates, were
solely for the benefit of the parties to such agreement, and may be
subject to limitations agreed upon by the contracting parties,
including being qualified by confidential disclosures exchanged
between the parties in connection with the execution of the
Underwriting Agreement. The representations and warranties may have
been made for the purposes of allocating contractual risk between
the parties to the agreement instead of establishing these matters
as facts, and may be subject to standards of materiality applicable
to the contracting parties that differ from those applicable to
investors. The foregoing description of the terms of the
Underwriting Agreement does not purport to be complete and is
qualified in its entirety by reference to the Underwriting
Agreement. Investors should review that document as well as the
Registration Statement and Prospectus Supplement for a complete
understanding of the terms and conditions associated with the
Offering.
This Current Report contains forward-looking statements that
involve risk and uncertainties, such as statements related to the
amount of net proceeds expected from the Offering. The risks and
uncertainties involved include various risks detailed in the
Company’s SEC filings from time to time.